A defiant Iran said on Wednesday that it will not back down despite newly announced Western sanctions over its atomic drive, as it took the first steps to hit back at the measures.

"The Iranian nation will not back down an iota, and will not allow the slightest move to encroach on the nation's rights" in terms of its nuclear programme, President Mahmoud Ahmadinejad said in a speech aired on state television.

In Iran's parliament, lawmakers -- some crying "Death to Britain" -- adopted an emergency bill calling for the expulsion of the British ambassador to Tehran.

If it is passed in a vote scheduled for Sunday, and is subsequently approved by Iran's Guardian Council, the law would see British-Iranian ties downgraded to charge d'affaires level.

The bill also said parliament could take action "on other countries that behave in a manner similar to that of Britain," according to the Fars and Mehr news agencies.

Britain said it would be "regrettable" if Iranian lawmakers vote to expel the British ambassador.

"It is too early to say what will happen next. But it would be regrettable if they were to take such action," a spokesman for Britain's Foreign and Commonwealth Office said.

"We believe that it is important to maintain senior channels of communication and especially at times like these. It is only through dialogue that we can solve the problems we face."

The sanctions targeting Iran's financial sector were unveiled Monday in coordinated announcements by the United States, Britain and Canada.

France separately called for the West to freeze Iranian central bank assets and slap an embargo on Iranian oil.

Britain, Canada and France have embassies in Tehran. Canada's is headed only by a charge d'affaires; the other two by ambassadors.

The United States does not have a diplomatic mission, having closed its embassy after Islamic students took its diplomats hostage in 1979 following Iran's revolution. US interests are handled by the Swiss embassy.

Russia has called the new sanctions illegal. China on Wednesday warned they would "intensify confrontation" between the West and Iran.

"We believe pressuring and sanctions cannot fundamentally solve the Iranian nuclear issue. On the contrary, they will complicate and exacerbate the issue," said Chinese foreign ministry spokesman Liu Weimin.

China and Russia used their weight on the UN Security Council to block any possibility of the sanctions being more broadly imposed through a UN resolution.

Ahmadinejad, speaking to a crowd east of Tehran, took a patronising tone with the countries imposing the sanctions.

"I advise them to cease these tantrums, and stop thinking that baring their claws and fangs will stop the Iranian nation," he said.

He reiterated that, contrary to Western claims Iran was pursuing nuclear weapons, "we do not need an atomic bomb."

"They ask us to prove that we do not have an atomic bomb... How can we prove something that does not exist? It is as if someone asks another person to prove that he is healthy... Sickness is proveable."

He took a swipe at France's call, saying "the slightest move to grab Iranian assets is akin to a great heist -- and Iran will treat the person responsible as a thief."

Turning to US sanctions, which declare the whole of Iran's financial sector "of primary money-laundering concern", Ahmadinejad said: "They accuse the Iranian nation of money laundering. We have no need to launder money."

The latest sanctions aim to make it more difficult for Iran to be paid for its oil exports, and put pressure on Iran's currency.

They stop short, however, of hitting the central bank with more draconian measures, which Western officials and analysts feared could cause a spike in oil prices, worsening the global economic downturn and providing Iran with a revenue windfall.

Iran's representative in OPEC, Mohammad Ali Khatibi, told ISNA news agency his country could "adopt special stances" in terms of using its vast oil exports as a political tool if "emergencies and special situations demand."

He stressed, though, that Iran was not at this time changing its approach in the global oil market.

Pressure on Iran looked likely to be raised a notch on December 1, when EU foreign ministers were expected to announce additional sanctions on some 200 Iranian firms and individuals, according to diplomats.

burs/srm